How IKEA Manages to keep its prices low

Diksha Sinha Diksha Sinha
Apr 4, 2021 5 min read
How IKEA Manages to keep its prices low

Thinking about renovating your home? Isn't IKEA the first name that pops up in your head when you think about shopping for furniture?

In recent times, IKEA has become the go-to option for young and old alike to shop for good quality, durable and affordable home dΓ©cor pieces. 'Affordable' being the keyword here.

Have you ever thought, how IKEA - a brand that specializes in premium homeware, has a price range that appeals to all sections of the society. The brand has made a niche for itself in selling high-end beds, sofas, dining sets and wardrobes at half the price of its competitors, but how does it manage the same?. Well, here's your answer.

There are quite a few methods that IKEA follows to keep their prices low while maintaining the quality of its products. Lets take a look at these methods.

A Reverse Design Process
IKEA's Flat Packaging Innovation
Bulk Production
Unique Construction Technique
IKEA's Self Help Stores
Take it home Policy
A Pioneer In Do it Yourself
FAQ

A Reverse Design Process

IKEA first decides on the price range for a particular product before starting to design the same. Where almost all competitor brands go by the book and follow the conventional process of choosing a design theme, making a storyboard, procuring the materials, putting together the design and then pricing the item according to the cost incurred, IKEA does the exact opposite.

IKEA's Flat Packaging Innovation

IKEA's founder, Ingvar Kamprad, introduced a new selling system in the year 1956, that he termed 'flat-packing'. This flat-packing selling technique has now become IKEA 's identity. So, what exactly is flat-packing? It is a selling system where IKEA sells parts of a furniture instead of selling the whole product together.

This allows the products to be packed in flat pieces, facilitating easier transport to stores. It also gives customers the option of choosing customized pieces for their use according to their convenience. Thus, IKEA manages to maintain the low price of its products. Β 

IKEA's Flat Packaging Innovation
IKEA's Flat Packaging Innovation

Bulk Production

IKEA produces all their furniture in bulk. This is something that they have agreed to time and again. Be it dining tables, chairs, sofas, wardrobes, beds, showcase or anything else, they produce a good number of all designs. Therefore, they are offered discounts on the bulk purchase of raw material as well as making costs. This is how the bulk production method allows IKEA to maintain a low pricing strategy.


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Unique Construction Technique

If you ever have the time to go through IKEA 's website, you will come to a part that describes their construction methods. They are always innovating new techniques and methods to maintain their low selling price while making sure that their customers have no complaints about the quality of the products.

On the website it is explained how IKEA uses the technique of constructing their furniture by layering sheets of wood over a honey-comb base structure. Since the honeycomb core requires less wood, it costs less money for production. Thus, IKEA is able to maintain the low product costs without compromising on quality.

Gross profit of IKEA worldwide
Gross profit of IKEA worldwide

IKEA's Self Help Stores

IKEA believes in promoting independent shopping. What is independent shopping?, It is nothing but allowing customers to shop on their own. Thus, IKEA does not hire a lot of store staff. This helps them to cut costs towards wages and provide customers with lesser priced products.

In order to allow customers to shop independently, they also print all the product details, cautions, installation processes, etc. on the price tags. Hence, customers can easily read the guidelines on the price tag and choose the merchandise they want to buy without any external help.


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Take it home Policy

IKEA does not deliver their merchandise to customers' homes. Customers have to carry their buys home by themselves. Although, a tad bit inconvenient this policy does come with its own set of contributions towards the low pricing strategy.

Since, customers have to carry their own products, they do not need to pay delivery charge to IKEA or pay higher product prices that may be used to facilitate free delivery. Also, IKEA does not need to maintain a logistics department for customer deliveries, reducing a lot of overhead cost on the making charges.

A Pioneer In Do it Yourself

If you have ever shopped at IKEA, you know pretty well that you must be adept at assembling and installing the furniture yourself. IKEA promotes a DIY environment, where it allows customers to install their own merchandise.

They provide guidebooks and assembly charts so support customers in installing their own furniture. Thus, the company does not need to pay any extra charges to internal or external teams for installation, thereby, maintaining their low price.

However, in the recent past IKEA has understood that the DIY method can become a hassle for some customers, so, they acquired TaskRabbit, an external furniture installation support company. Therefore, customers have the option of hiring executives at TaskRabbit for assembling their furniture at lower costs.

FAQ

Is IKEA cheap in India?

IKEA to boost affordability in India has priced Out of the 7,500 products that it sells about 1,000 are priced less than Rs 200 and 500 cost under Rs 100.

Does IKEA sell online in India?

YEs, IKEA does sell online in India.

What does the word IKEA stand for?

IKEA stands for Ingvar Kamprad Elmtaryd Agunnaryd.

Conclusion

With so many unique features and methods, IKEA has become a front-running strategist in keeping their product pricing low and maintaining their position in the market. The innovation applied in every aspect of the business makes sure that IKEA keeps giving a tough challenge to their competitors in the market, holding the top position when it comes to being one of the best furniture-selling businesses in the world.

Now you know where to go the next time you want to furnish your home.

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